Adept Technology 10Q/A 2006 Q1 Quarterly report (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 1, 2005

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 0-27122

ADEPT TECHNOLOGY, INC.

(Exact name of Registrant as Specified in its Charter)


Delaware		94-2900635
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

3011 Triad Drive, Livermore, California		94550
(Address of Principal Executive Offices)		(Zip Code)

(925) 245-3400

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES x NO ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer x

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES ¨ NO x

The number of shares of the Registrant’s common stock outstanding as of November 10, 2005 was 6,177,213.

Adept Technology, Inc.

FORM 10-Q/A

EXPLANATORY NOTE

This amendment no. 1 to the quarterly report on Form 10-Q/A (“Form 10-Q/A”) of Adept Technology, Inc. (“Adept”) is being filed to amend our quarterly report on Form 10-Q for the quarter ended October 1, 2005, which was originally filed on November 15, 2005, (the “Original 10-Q Filing”). In accordance with the rules of the Securities and Exchange Commission, this Form 10-Q/A amends and restates certain previously issued financial information in the following sections as a result of the current restatements described below:

Part I – Item 1. Condensed Consolidated Financial Statements (Unaudited)

Part I – Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Part I – Item 3. Quantitative and Qualitative Disclosures About Market Risk

Part I – Item 4. Controls and Procedures

Part II – Item 6. Exhibits, consisting of certain currently dated certifications

Unaffected items have not been repeated in this Form 10-Q/A.

In September 2006, in the course of conducting the year end consolidation of Adept’s financial results for fiscal year 2006, and in conjunction with the audit of those results, we identified various errors in a number of accounts, primarily involving intercompany eliminations associated with the consolidation of international subsidiaries, resulting in changes to the foreign currency exchange gain (loss), cost of revenue, net income and ending balance sheet balances and other items as discussed in Note 18 to the Notes to the Restated Condensed Consolidated Financial Statements.

As a result of correcting these errors, we have restated our condensed consolidated balance sheet as of October 1, 2005, our condensed consolidated statement of operations for the three months ended October 1, 2005, and our condensed consolidated statement of cash flows for the three months ended October 1, 2005. We have also restated our notes to condensed consolidated financial statements as necessary to reflect the adjustments. Please read Note 18 to the Notes to Restated Condensed Consolidated Financial Statements for a discussion of the adjustments.

The Company has amended Part I Item 3 “Quantitative and Qualitative Disclosures About Market Risk” to reflect the restatement of cash and cash equivalents as of October 1, 2005.

The Company has also amended Part I Item 4 “Controls and Procedures” and updated the certifications of the Chief Executive Officer and Chief Financial Officer as of the date of this Form 10-Q/A.

This Form 10-Q/A only amends and restates the Items described above to reflect the effects of the restatement, and no attempt has been made to update other disclosures presented in our Form 10-Q for the quarter ended October 1, 2005. Accordingly, except for the foregoing information, this Form 10-Q/A continues to speak as of the filing date of the Original 10-Q Filing, and does not reflect events occurring after the date of the Original 10-Q Filing and does not modify or update those disclosures affected by subsequent events. Forward-looking statements made in the Original 10-Q Filing have not been revised to reflect events, results or developments that have become known to us after the date of the original filing (other than as relates to the current restatements described above), and such forward-looking statements should be read in their historical context. Unless otherwise stated, the information in this Form 10-Q/A not affected by such current restatements is unchanged and reflects the disclosures made at the time of the Original 10-Q Filing. In addition, the filing of this Form 10-Q/A shall not be deemed an admission that the Original 10-Q Filing, when made, included any untrue statement of material fact or omitted to state a material fact necessary to make a statement made therein not misleading.

ADEPT TECHNOLOGY, INC.


		Page
PART I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets (Restated) October 1, 2005 and June 30, 2005		4

Condensed Consolidated Statements of Operations (Restated) Three months ended October 1, 2005 and October 2, 2004		5

Condensed Consolidated Statements of Cash Flows (Restated) Three months ended October 1, 2005 and October 2, 2004		6

Notes to Restated Condensed Consolidated Financial Statements		7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		20

Item 3. Quantitative and Qualitative Disclosures About Market Risk		28

Item 4. Controls and Procedures		28

PART II - OTHER INFORMATION

Item 6. Exhibits		31

Signatures		32

PART I – FINANCIAL INFORMATION

ITEM 1.

Condensed Consolidated Financial Statements (Unaudited)

ADEPT TECHNOLOGY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Restated)

(in thousands)


	October 1, 2005			June 30, 2005
	(as restated)
ASSETS
Current assets:
Cash and cash equivalents	$	3,529		$	5,334
Accounts receivable, less allowance for doubtful accounts of $889 at October 1, 2005 and $754 at June 30, 2005		14,498			11,184
Inventories, net		9,585			10,201
Other current assets		383			642

Total current assets		27,995			27,361

Property and equipment at cost		10,563			10,112
Less accumulated depreciation and amortization		(9,000	)		(8,869	)

Property and equipment, net		1,563			1,243
Goodwill		3,176			3,176
Other intangible assets, net		179			228
Other assets		187			201

Total assets	$	33,100		$	32,209

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Subordinated convertible note	$	3,000		$	3,000
Accounts payable		6,965			6,916
Accrued payroll and related expenses		2,363			1,501
Accrued warranty expenses		1,944			2,040
Deferred revenue and accrued restructuring expenses		70			82
Other accrued liabilities		862			727

Total current liabilities		15,204			14,266

Long-term liabilities:
Other long-term liabilities		216			242

Total liabilities		15,420			14,508

Shareholders’ equity:
Common stock, no par value: 14,000 shares authorized, 6,176 and 6,137 shares issued and outstanding at October 1, 2005 and June 30, 2005, respectively		144,518			144,183
Accumulated deficit:		(126,838	)		(126,482	)

Total shareholders’ equity		17,680			17,701

Total liabilities and shareholders’ equity	$	33,100		$	32,209

Reflects the one-for-five reverse stock split by Adept effective February 25, 2005

See accompanying notes

ADEPT TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Restated)

(in thousands, except per share data)


	Three months ended
	October 1, 2005			October 2, 2004
	(as restated)
Revenues	$	14,641		$	11,293
Cost of revenues		7,788			5,827

Gross profit		6,853			5,466
Operating expenses:
Research, development and engineering		1,902			1,661
Selling, general and administrative		5,165			3,793
Restructuring charge (reversal)		—			(43	)
Amortization of intangible assets		49			49

Total operating expenses		7,116			5,460

Operating income (loss)		(263	)		6

Interest expense, net		(28	)		(37	)
Foreign currency exchange gain (loss)		(59	)		83

Income (loss) before income taxes		(350	)		52
Provision for income taxes		6			12

Net income (loss)	$	(356	)	$	40

Basic income (loss) per share	$	(0.06	)	$	0.01

Diluted income (loss) per share	$	(0.06	)	$	0.01

Number of shares used in computing basic per share amounts		6,173			5,981

Number of shares used in computing diluted per share amounts		6,173			7,802

Reflects the one-for-five reverse stock split by Adept effective February 25, 2005

See accompanying notes

ADEPT TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Restated)

(in thousands)


	Three months ended
	October 1, 2005			October 2, 2004
	(as restated)
Operating activities
Net income (loss)	$	(356	)	$	40
Non-cash adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation		131			247
Stock compensation		189			—
Amortization of intangibles		49			49
Non-cash interest expense		45			45
Net changes in operating assets and liabilities:
Accounts receivable, net		(3,314	)		3,060
Inventories, net		616			(1,258	)
Other current assets		258			(395	)
Other assets		14			(1	)
Accounts payable		48			(1,047	)
Other accrued liabilities and deferred revenues		852			(314	)
Accrued restructuring expenses		(6	)		(141	)
Other long-term liabilities		(26	)		23

Net cash provided by (used in) operating activities		(1,500	)		308

Investing activities
Purchase of property and equipment		(451	)		(189	)

Net cash used in investing activities		(451	)		(189	)

Financing activities
Proceeds from employee stock incentive program and employee stock purchase plan		146			146

Net cash provided by financing activities		146			146

Increase (decrease) in cash and cash equivalents		(1,805	)		265
Cash and cash equivalents, beginning of period		5,334			4,957

Cash and cash equivalents, end of period	$	3,529		$	5,222

Cash paid during the period for:
Interest	$	45		$	46
Taxes	$	31		$	19

See accompanying notes.

ADEPT TECHNOLOGY, INC.

NOTES TO RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.	General

The accompanying restated condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles. However, certain information or footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The information furnished in this report reflects all adjustments that, in the opinion of management, are necessary for a fair presentation of the consolidated financial position, results of operations and cash flows as of and for the interim periods. The results for such periods are not necessarily indicative of the results to be expected for the full fiscal year or for any other future period. The condensed consolidated financial statements included in this quarterly report on Form 10-Q/A should be read in conjunction with the audited consolidated financial statements and notes thereto for the fiscal year ended June 30, 2005 included in Adept Technology, Inc.’s (“Adept” or the “Company”) Annual Report on Form 10-K as filed with the Securities and Exchange Commission on September 28, 2005.

The preparation of condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Therefore, actual results could differ from those estimates and could have a material impact on our consolidated financial statements, and it is possible that such changes could occur in the near term.

The Company applies Statement of Financial Accounting Standards No. 52, “Foreign Currency Translation,” with respect to its international operations, which are primarily sales and service entities. The accounts denominated in non-U.S. currencies have been re-measured using the U.S. dollar as the functional currency. All monetary assets and liabilities are remeasured at the current exchange rate at the end of the period, nonmonetary assets and liabilities are remeasured at historical exchange rates, and revenues and expenses are remeasured at average exchange rates in effect during the period.

On January 25, 2005, our Board of Directors approved a one-for-five reverse stock split, within the range previously approved by Adept’s shareholders. The reverse stock split became effective on February 25, 2005. All current and historical share and per share information included in these condensed consolidated financial statements has been restated to reflect the results of the reverse stock split.

Certain amounts presented in the consolidated financial statements for prior periods have been reclassified to conform to the fiscal year 2006 presentation.

2.	Stock-Based Compensation

The Company has adopted stock plans that provide for the grant to employees of stock-based awards, including stock options and restricted shares, of Adept common stock. In addition, these plans permit the grant of nonstatutory stock-based awards to paid consultants and outside directors. Option awards are granted with an exercise price equal to the market price of our stock on the date of grant; those option awards generally vest evenly over the next four years of continuous service and have ten-year contractual terms. The Company also has an employee stock purchase plan (ESPP) that allows employees to purchase a limited number of shares of its common stock at a discount of 15% of the market value at certain plan-defined dates that are established at six-month intervals.

Adept has one employee stock purchase plan and four equity compensation plans, including the 2001 Stock Option Plan, 2003 Stock Option Plan, 2004 Director Option Plan and 2005 Equity Incentive Plan. As of October 1, 2005, there are 312,191 shares available for issuance under the 1998 Employee Stock Purchase Plan. The plan provides for an annual automatic increase in the number of shares available for issuance by the lesser of 120,000 shares, 3% of the shares outstanding, or a lesser amount as may be determined by the Board of Directors. There are 413,000 shares subject to outstanding options under the 2001 Stock Option Plan with 14,387 available for grant. Under the 2003 Stock Option Plan, there are 240,000 shares subject to outstanding options with 158,834 available for grant. The 2004 Director Option Plan has 8,000 shares subject to outstanding options with 52,000 available for grant. The

2005 Equity Incentive Plan has 400,000 shares authorized with 400,000 available for grant. Under all of these plans, for employee grants, vesting is generally monthly in equal installments over a four year period. Under the director option plan, initial director grants vest one-fourth on the first anniversary of the grant, then monthly in equal installments thereafter for three years. Annual director grants vest monthly in equal installments over a four year period.

The Company adopted Statement of Financial Accounting Standards No. 123 (Revised 2004), “Share –Based Payment” (SFAS 123R), effective July 1, 2005. SFAS 123R requires the recognition of fair value of stock compensation as an expense in the calculation of net income. We recognize the stock compensation expense ratably over the vesting period of the individual equity instruments. All stock compensation recorded during the three months ended October 1, 2005 has been accounted for as an equity instrument. Prior to July 1, 2005, we followed the Accounting Principles Board (“APB”) Opinion 25, “Accounting for Stock Issued to Employees”, and related interpretations for our stock compensation.

We have elected the modified prospective transition method for adopting SFAS 123R. Under this method, the provisions of SFAS 123R apply to all stock-based awards granted or other awards granted that are subsequently reclassified into equity. The unrecognized expense of awards not yet vested as of July 1, 2005, the date of SFAS 123R adoption by the Company, is now being recognized as expense in the calculation of net income using the same valuation method (the Black-Scholes model) and assumptions disclosed prior to our adoption of SFAS 123R. As of July 1, 2005, we had an unrecorded deferred stock-based compensation balance related to stock options of $1.1 million after estimated forfeitures. The unamortized compensation cost (previously being recognized under FAS 123 on a pro-forma basis) for options granted but not vested as of July 1, 2005 will be recognized ratably over the remaining vesting period of such options.

Under the provisions of SFAS 123R we recorded $189,000 of stock-based compensation expense on our unaudited condensed consolidated statement of operations for the three months ended October 1, 2005, for our stock plans and ESPP. We did not record an income-tax benefit for the stock compensation expense because of the extent of our net operating loss carryforwards. We utilized the Black-Scholes valuation model for estimating the fair value of the compensation after the adoption of SFAS 123R. The weighted average grant-date fair values of the options granted under the stock option plans and shares subject to purchase under the ESPP for the three months ended October 1, 2005 were $4.42 and $2.39, respectively, using the following assumptions.


	Three Months Ended October 1, 2005
	Stock Option Plan		Purchase Plan
Average risk free interest rate	3.79	%	3.49	%
Expected life (in years)	2.89		0.50
Expected volatility	0.88		0.88
Dividend yield	0	%	0	%

The dividend yield of zero is based on the fact that we have never paid cash dividends and have no present intention to pay cash dividends. Expected volatility is based on the historical volatility of our common stock over the period commensurate with the expected life of the options or ESPP shares. The risk-free interest rate is based on observed and expected time to post-vesting exercise and forfeitures of options or ESPP shares by our employees. The expected life in years is based on the historic time to post-vesting exercise and forfeitures of the options or ESPP shares.

Based on our historical experience of option pre-vesting cancellations, we have assumed an annualized forfeiture rate of 20% for our options. Under the true-up provisions of SFAS 123R, we will record additional expense if the actual forfeiture rate is lower than we estimated, and will record a recovery of prior expense if the actual forfeiture is higher than we estimated.

A summary of stock option activity under the option plans as of October 1, 2005 and changes during the three months then ended is presented below:


Options	Shares (in thousands)		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in thousands)
Outstanding at June 30, 2005	762		$	14.81
Granted	163			8.44
Exercised	(6	)		3.21
Forfeited or Expired	(11	)		33.94

Outstanding at October 1, 2005	908		$	12.97	7.66	$	2,629

Vested/Expected to Vest at October 1, 2005	765		$	13.79	7.16	$	2,316

Exercisable at October 1, 2005	409		$	18.44	6.61	$	1,352

During the three months ended October 1, 2005, we granted options for 162,500 shares of common stock with an estimated total grant date fair market value of $720,000 after estimated forfeitures. The intrinsic value of options exercised during the three months ended October 1, 2005 was $32,000. Cash received from stock option exercises and ESPP purchases was $16,000 and $121,000, respectively, during the three months ended October 1, 2005. As of October 1, 2005, there was $660,000 of total unrecognized compensation cost related to non-vested stock options granted and outstanding; that cost is expected to be recognized through fiscal year 2010, with a weighted average remaining period of 1.6 years.

SFAS 123R requires us to present pro forma information for the comparative period prior to the adoption as if we had accounted for all our employee stock options and stock acquired under our stock purchase plan under the fair value method of the original SFAS 123. The following table illustrates the effect on net income and earnings per share if we had applied the fair value recognition provisions of SFAS 123 to stock-based employee compensation to the prior-year periods (dollars in thousands, except per share data). Note that stock-based employee compensation expense for fiscal 2005 was revised in the fourth quarter of fiscal 2005 due to our revision of assumptions regarding the expected term and volatility of options, and the amounts shown here are consistent with the revision. The revision was based on an analysis of historic patterns of option exercises and forfeitures, which reduced the expected term from approximately 9 years to 3.35 years, and this change in expected term impacted the volatility calculation as well.


	Three Months Ended October 2, 2004
Net income as reported	$	40
Add: Employee stock compensation included in reported net income		—
Less: employee stock compensation under SFAS No. 123		(231	)

Pro forma net loss	$	(191	)

Net income per basic and diluted share as reported		0.01
Pro forma net loss per basic and diluted share	$	(0.03	)

During the three months ended October 2, 2004, the weighted average fair values of the options granted under the stock option plans and shares subject to purchase under the employee stock purchase plan were $4.68 and $4.91 respectively, using the following assumptions.


	Three Months Ended October 2, 2004
	Stock Option Plan		Purchase Plan
Dividend yield	0	%	0	%
Expected volatility	0.66		3.23
Average risk free interest rate	4.03	%	4.56	%
Expected life (in years)	8.58		0.51

The amortization of stock compensation under SFAS 123R for the period after its adoption, and under APB 25 or SFAS 123 (pro forma disclosure) for the period prior to the adoption of SFAS 123R was done in accordance with Financial Accounting Standards Board (“FASB”) Interpretation (“FIN”) No. 28. The total compensation cost of options granted but not yet vested as of July 1, 2005 is expected to be recognized over the weighted average period of four years.

3.	Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Short-term investments typically consist of marketable securities and money market investments with maturities between three and 12 months. Investments are classified as held-to-maturity, trading, or available-for-sale at the time of purchase. At October 1, 2005, the Company held no short-term investments.

4.	Inventories

Inventories net of reserves are stated at the lower of standard cost, which approximates actual cost under the first-in, first-out method, or market value. The components of inventory are as follows:


	(in thousands)
	October 1, 2005		June 30, 2005
	(as restated)
Raw materials	$	3,414	$	3,835
Work-in-process		1,790		2,176
Finished goods		4,381		4,190

	$	9,585	$	10,201

Inventory reserves for estimated obsolescence or unmarketable inventory were $2.4 million at October 1, 2005 and $2.5 million at June 30, 2005.

5.	Property and Equipment

Property and equipment are recorded at cost.

The components of property and equipment are summarized as follows:


	(in thousands)
	October 1, 2005			June 30, 2005
Machinery and equipment	$	3,137		$	2,844
Computer equipment		5,373			5,234
Office furniture and equipment		2,053			2,034

		10,563			10,112
Accumulated depreciation and amortization		(9,000	)		(8,869	)

Net property and equipment	$	1,563		$	1,243

6.	Intangible Assets

The following is a summary of the gross carrying amount and accumulated amortization, aggregate amortization expense, and estimated remaining annual amortization expense related to the intangible assets subject to amortization.


	(in thousands) As of October 1, 2005
Amortizable intangible assets	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Developed technology	$	2,389	$	(2,210	)	$	179
Non-compete agreements		380		(380	)		—

Total	$	2,769	$	(2,590	)	$	179

The aggregate amortization expense for the three months ended October 1, 2005 totaled $49,000 and the estimated amortization expense for the next two years is as follows:


	(in thousands) Amount
Remaining for fiscal year 2006	$	146
For fiscal year 2007		33

	$	179

7.	Warranties

The Company generally offers a two year parts and one year labor limited warranty for most of its hardware component products. The specific terms and conditions of those warranties are set forth in the Company’s “Terms and Conditions of Sale,” and published in sales catalogs and on each sales order acknowledgement. The Company estimates the costs that may be incurred under its limited warranty, and records a liability through charges to cost of revenues at the time product revenue is recognized. Factors that affect the Company’s warranty liability include the number of installed units, historical and anticipated rates of warranty claims, and costs per claim. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.

Changes in the Company’s warranty liability are as follows:


	(in thousands) Three months ended
	October 1, 2005			October 2, 2004
Balance at beginning of period	$	2,040		$	2,111
Provision for warranties issued		279			237
Change in estimated warranty provision including expirations		—			(91	)
Warranty claims		(375	)		(291	)

Balance at end of period	$	1,944		$	1,966

8.	Accrued Restructuring Expenses

The following table summarizes the Company’s accrued restructuring expenses:


	Balance June 30, 2005		Less Amounts Paid Q1 Fiscal 2006		Balance October 1, 2005
Lease commitments	$	22	$	6	$	16

During the quarter ended October 1, 2005, the Company was able to complete the restructuring of its lease in Los Angeles, California, which resulted in a $6,000 reduction in the restructuring accrual. The balance at October 1, 2005 is comprised entirely of scheduled obligations that are expected to be paid out or released during the remainder of fiscal 2006 against non-cancelable lease commitments.

9.	Legal Proceedings

From time to time, the Company is party to various legal proceedings or claims, either asserted or unasserted, which arise in the ordinary course of its business. The Company has reviewed pending legal matters and believes that the resolution of these matters will not have a material adverse effect on its business, financial condition or results of operations.

Adept has in the past received communications from third parties asserting that it has infringed certain patents and other intellectual property rights of others, or seeking indemnification against alleged infringement. While it is not feasible to predict or determine the likelihood or outcome of any actual or potential actions from such assertions against the Company, it believes the ultimate resolution of these matters will not have a material adverse effect on its financial position, results of operations or cash flows.

10.

Income Taxes

The Company provides for income taxes during interim reporting periods based upon an estimate of its annual effective tax rate. The Company also maintains a liability to cover the cost of additional probable tax exposure items pertaining to the filing of federal and state income tax returns, as well as filings in foreign jurisdictions. Each of these filing jurisdictions may audit the tax returns filed and propose adjustments. Adjustments arise from a variety of factors, including different interpretations of statutes and regulations. For the three months ended October 1, 2005, the Company recorded a provision for income taxes from continuing operations of $6,000 for domestic and international tax liabilities.

11.

Income (Loss) per Share

Basic income (loss) per share is computed by dividing net income (loss), the numerator, by the weighted average number of shares of common stock outstanding, the denominator, during the period. Diluted income per share gives effect to equity instruments considered to be potential common shares, if dilutive, computed using the treasury stock method of accounting. The computation of diluted net income per share for the first quarter of fiscal 2006 does not include the following securities because the effect of their inclusion would be anti-dilutive: options to purchase common stock of 831,645; and warrants to purchase common stock of 1,131,112


	Three months ended
(in thousands)	October 1, 2005			October 2, 2004
	(as restated)
Net Income (Loss)	$	(356	)	$	40

Basic:
Weighted average number of shares used in computing basic per share amounts		6,173			5,981

Basic net income (loss) per share	$	(0.06	)	$	0.01

Diluted:
Weighted average number of common shares used in computing basic net income (loss) per share		6,173			5,981
Add: Weighted average number of dilutive potential Common stock		—			1,821

Weighted average number of common shares used in computing diluted net income (loss) per share		6,173			7,802

Diluted net income (loss) per share	$	(0.06	)	$	0.01

12.

Segment Information

SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,” requires disclosures of certain information regarding operating segments, products and services, geographic areas of operation and major customers. SFAS No. 131 reporting is based upon the “management approach”: how management organizes the company’s operating segments for which separate financial information is (i) available and (ii) evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Adept’s chief operating decision maker is its President and Chief Executive Officer, or CEO.

Adept’s business is focused towards delivering intelligent flexible production automation products, components and services for assembly and material handling applications under two categories: (1) Robotics and (2) Services and Support.

The Robotics segment provides intelligent production automation software and hardware component products externally to customers.

The Services and Support segment provides support services to customers including: supplies of spare parts and refurbished and new direct drive robots; providing information regarding the use of the Company’s automation equipment; assisting with the ongoing support of installed systems; consulting services for applications; and training courses ranging from system operation and maintenance to advanced programming geared towards manufacturing engineers who design and implement automation lines.

The Company evaluates performance and allocates resources based on segment revenue and segment profit. Segment profit is comprised of income before unallocated research, development and engineering expenses, unallocated general and administrative expenses, interest income, and interest and other expenses.

Management does not fully allocate research, development and engineering expenses and general and administrative expenses when making capital spending and expense funding decisions or assessing segment performance. There is no inter-segment revenue recognized. Transfers of materials or labor between segments are recorded at cost.

Segment information for total assets and capital expenditures is not presented as such information is not used in measuring segment performance or allocating resources between segments.


	Three months ended
(in thousands)	October 1, 2005			October 2, 2004
	(as restated)
Revenues:
Robotics	$	8,204		$	7,583
Services and Support		6,437			3,710

Total revenues	$	14,641		$	11,293

Operating income:
Robotics	$	851		$	1,562
Services and Support		1,353			835

Segment profit		2,204			2,397
Unallocated research, development and engineering and general and administrative		(2,418	)		(2,385	)
Restructuring (charges) reversal		—			43
Amortization of intangible assets		(49	)		(49	)

Operating income (loss)		(263	)		6
Interest income		18			9
Interest expense		(46	)		(46	)
Foreign currency gain (loss)		(59	)		83

Income (Loss) before income taxes	$	(350	)	$	52

Management also assesses the Company’s performance, operations and assets by geographic areas, and therefore revenue and long-lived tangible assets are summarized in the following table:


	Three months ended
(in thousands)	October 1, 2005		October 2, 2004
Revenue:
United States	$	4,887	$	3,223
Germany		4,405		2,938
France		1,831		986
Switzerland		814		736
Other European countries		1,401		995
Singapore		1,133		698
All other countries		170		1,717

Total	$	14,641	$	11,293


(in thousands)	October 1, 2005		June 30, 2005
Long-lived tangible assets:
United States	$	4,858	$	4,583
All other countries		247		213

Total long-lived tangible assets	$	5,105	$	4,796

13.

Comprehensive Income

For the three months ended October 1, 2005 and October 2, 2004, there were no significant differences between the Company’s comprehensive income or loss and its net income or loss.

14.

Equity

During the three months ended October 1, 2005, 6,290 shares of common stock were issued upon the exercise of options under the Company’s stock option plans, and 25,544 shares of common stock were issued under the Company’s employee stock purchase plan (ESPP). Shares are issued semi-annually under the ESPP, in February and August. Total shares outstanding at October 1, 2005 were 6,176,548.

15.

Foreign Currency Translation

Translation gains (losses) resulting from the process of re-measuring foreign currency financial statements into U.S. dollars were $(81,000) and $7,000 for the three months ended October 1, 2005 and October 2, 2004, respectively. Foreign currency transaction gains (losses) were $22,000 and $76,000 for the three months ended October 1, 2005 and October 2, 2004, respectively. In the past the Company has included foreign currency exchange gains or losses in selling, general and administrative expenses, but beginning in the second quarter of fiscal 2005, foreign currency gains or losses are reported as a separate line item in the income statement.

16.

Impact of Recently Issued Accounting Standards

On December 16, 2004, the Financial Accounting Standards Board issued Statement 123R, Share-Based Payment, which is a revision of Statement 123, Accounting for Stock Based Compensation. Statement 123R supercedes APB Opinion No. 25, Accounting for Stock Issued to Employees and amends Statement No. 95, Statement of Cash Flows. As amended effective April 14, 2005, Statement 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values (i.e., proforma disclosure is no longer an alternative to financial statement recognition). Statement 123R is effective for public companies (excluding small business issuers) at the beginning of the first interim or annual period beginning after June 15, 2005. Statement 123R became effective for Adept for the quarter ending October 1, 2005. See “Stock-Based Compensation” in Note 2 to the Company’s Condensed Consolidated Financial Statements for the pro forma net income and net income per share amounts, for the three months ended October 2, 2004.

17.

Subsequent Events

Effective November 4, 2005, Adept reincorporated from California into Delaware by merging with and into its wholly owned subsidiary Adept-Delaware, as contemplated by a merger agreement between the parties. As a result of the merger, each share of Adept-California’s common stock, no par value per share, was automatically converted into one share of Adept-Delaware’s common stock, par value $0.001 per share, and each previously issued and outstanding share of Adept-Delaware common stock was cancelled. The reincorporation will not result in any significant change in Adept-California’s business, management, employees, fiscal year, assets or liabilities, will not cause the principal executive offices or other facilities of Adept-California to be moved, and will not result in any relocation of management or other employees.

In addition, effective November 4, 2005, prior to the consummation of the reincorporation of Adept in Delaware, the Certificate of Incorporation of Adept-Delaware was amended to increase the number of shares of authorized capital stock of Adept-Delaware to 20,000,000, consisting of 19,000,000 shares of common stock and 1,000,000 shares of preferred stock.

18.

Restatement of Fiscal 2006 Interim Periods

In the course of conducting the year-end consolidation of Adept’s financial results for fiscal year 2006, and in conjunction with the audit of those results, we identified various errors in a number of accounts. Specifically, adjustments were made to address the following items relating to the interim results for the quarter ended October 1, 2005:

•

Improper elimination of the profit in inventory held by international subsidiaries which has been transferred from the U.S. resulting in overstatement of reported inventories and gross margins.

•

Improper identification and elimination of inter-company transactions and receivable/payable account balances between Adept subsidiaries.

•

Improper recording of foreign exchange transaction gains and losses.

•

Mistreatment or inconsistent re-measurement of balances denominated in foreign currencies or US dollar cash balance in foreign subsidiaries.

•

Erroneous consolidating entries for foreign subsidiaries created certain incorrect asset and liability balances within the consolidated financial statements.

Due primarily to the nature and volume of the consolidating adjustments and the complexities involved in the consolidation process, especially the consolidation of Adept’s international, foreign currency based subsidiaries, the company determined that it was necessary to essentially re-perform the consolidation of the financial statements for all interim periods of fiscal 2006 in order to be able to properly restate the financial statements for the interim periods of fiscal 2006. Due to insufficient documentation relating to certain errors and employee turnover in the finance organization, resulting in the absence of institutional knowledge as to certain incorrect items, the re-consolidation incorporated certain assumptions believed to be reasonable by management in order to render the financial statements materially accurate and reliable. Actions taken by Adept to address these issues included: re-computation of gross inventory to properly eliminate any inter-company profit; re-computation of standard cost of sales; reconciliation of foreign currency cash balances to reconciled bank statements; re-computation of foreign currency transactions and re-measurement of foreign currency balances; and the review of all accounts used in processing inter-company transactions, assuring that they were properly cleared or balanced. Specific procedures determined necessary to complete such actions were:

•

Inventory unit balances, from all locations, were re-calculated at standard to arrive at gross inventory values (before excess and obsolete reserves) which did not include any inter-company profit;

•

Monetary accounts held in foreign currencies where individually calculated at the appropriate rate for the balance sheet date;

•

Standard cost of sales were tied back to shipment details calculated at standard to assure that any inter-company profit was eliminated; and

•

All balance sheet accounts were reviewed for inter-company transactions. All accounts found to be used in recording or clearing inter-company transactions were either cleared, determined to be in balance, or brought into balance.

The re-performed consolidation resulted in adjustments to: cost of revenue, foreign currency exchange gain/(loss), net income/(loss), net income/(loss) per share, cash, accounts receivable, inventories, accounts payable, accrued liabilities and shareholders equity. As a result of correcting all identified errors, we have restated our condensed consolidated balance sheet as of October 1, 2005; our condensed statement of operations for the three months ended October 1, 2005; and our condensed statement of cash flows for the three months ended October 1, 2005. As detailed below, the restatement resulted in the reduction of previously reported net income for the quarter ended October 1, 2005 by approximately ($516,000) creating a net loss of approximately ($356,000) for that quarter compared to previously reported net income of approximately $160,000 for that quarter.

For the quarter ended October 1, 2005 material adjustments were required for the following areas: the re-computation of inventory to eliminate inter-company profit, as described above, resulted in the reduction of inventory by approximately ($0.5 million) and a corresponding increase in cost of revenue; inter-company accounts found to be out of balance were brought into balance resulting in an increase in cost of revenue of approximately ($0.3 million); and the correction of previously incorrect measurement of foreign currency transactions and balances affected various current asset and liability accounts and resulted in a positive net income adjustment of approximately $0.3 million, also recorded to cost of revenue.

ADEPT TECHNOLOGY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Restated)

(unaudited)

(in thousands)


	October 1, 2005
	As Previously Reported			As Restated
ASSETS
Current assets:
Cash and cash equivalents	$	3,754		$	3,529
Accounts receivable, less allowance for doubtful accounts of $855 at October 1, 2005 and $754 at June 30, 2005		14,156			14,498
Inventories, net		10,130			9,585
Other current assets		384			383

Total current assets		28,424			27,995

Property and equipment at cost		10,563			10,563
Less accumulated depreciation and amortization		(9,000	)		(9,000	)

Property and equipment, net		1,563			1,563
Goodwill		3,176			3,176
Other intangible assets, net		179			179
Other assets		187			187

Total assets	$	33,529		$	33,100

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Subordinated convertible note	$	3,000			3,000
Accounts payable		6,964			6,965
Accrued payroll and related expenses		2,325			2,363
Accrued warranty expenses		1,944			1,944
Deferred revenue and accrued restructuring expense		70			70
Other accrued liabilities		814			862

Total current liabilities		15,117			15,204

Long-term liabilities:
Other long-term liabilities		216			216

Total liabilities		15,333			15,420

Shareholders’ equity:
Common stock, no par value: 14,000 shares authorized, 6,176 and 6,137 shares issued and outstanding at October 1, 2005 and June 30, 2005, respectively		144,017			144,518
Accumulated deficit:		(125,821	)		(126,838	)

Total shareholders’ equity		18,196			17,680

Total liabilities and shareholders’ equity	$	33,529		$	33,100

Reflects the one-for-five reverse stock split by Adept effective February 25, 2005

ADEPT TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Restated)

(unaudited)

(in thousands, except per share data)


	Three months ended October 1, 2005
	As Previously Reported			As Restated
Revenues	$	14,641		$	14,641
Cost of revenues		7,167			7,788

Gross profit		7,474			6,853
Operating expenses:
Research, development and engineering		1,902			1,902
Selling, general and administrative		5,165			5,165
Restructuring charge (reversal), net		—			—
Amortization of intangible assets		49			49

Total operating expenses		7,116			7,116

Operating income (loss)		358			(263	)
Interest expense, net		(28	)		(28	)
Foreign currency exchange loss		(164	)		(59	)

Income (Loss) before income taxes		166			(350	)
Provision for income taxes		6			6

Net income (loss)	$	160		$	(356	)

Basic income (loss) per share	$	0.03		$	(0.06	)

Diluted income (loss) per share	$	0.02		$	(0.06	)

Number of shares used in computing basic per share amounts		6,173			6,173

Number of shares used in computing diluted per share amounts		7,971			6,173

Reflects the one-for-five reverse stock split by Adept effective February 25, 2005

ADEPT TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Restated)

(unaudited)

(in thousands)


	Three months ended October 1, 2005
	As Previously Reported			As Restated
Operating activities
Net income (loss)	$	160		$	(356	)
Non-cash adjustments to reconcile net income to net cash used in operating activities:
Depreciation		131			131
Stock compensation		189			189
Amortization of intangibles		49			49
Non-cash interest expense		45			45
Net changes in operating assets and liabilities:
Accounts receivable, net		(2,972	)		(3,314	)
Inventories, net		71			616
Other current assets		258			258
Other assets		14			14
Accounts payable		48			48
Other accrued liabilities and deferred revenues		764			852
Accrued restructuring expenses		(6	)		(6	)
Other long-term liabilities		(26	)		(26	)

Net cash used in operating activities		(1,275	)		(1,500	)

Investing activities
Purchase of property and equipment		(451	)		(451	)

Net cash used in investing activities		(451	)		(451	)

Financing activities
Proceeds from employee stock incentive program and employee stock purchase plan		146			146

Net cash provided by financing activities		146			146

Increase (decrease) in cash and cash equivalents		(1,580	)		(1,805	)
Cash and cash equivalents, beginning of period		5,334			5,334

Cash and cash equivalents, end of period	$	3,754		$	3,529

Cash paid during the period for:
Interest	$	45		$	45
Taxes	$	31		$	31

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This report contains forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

•

the economic environment affecting us and the markets we serve;

•

sources of revenues and anticipated revenues, including the contribution from the growth of new products and markets;

•

our expectations regarding our cash flows and the impact of the timing of receipts and disbursements;

•

our estimates regarding our liquidity and capital requirements;

•

marketing and commercialization of our products under development;

•

our ability to attract customers and the market acceptance of our products;

•

our ability to establish relationships with suppliers, systems integrators and OEMs for the supply and distribution of our products;

•

plans for future products and services and for enhancements of existing products and services;

•

plans for future acquisitions of products, technologies and businesses; and

•

our intellectual property.

In some cases, you can identify forward-looking statements by terms such as “may,” “intend,” “might,” “will,” “should,” “could,” “would,” “expect,” “believe,” “estimate,” “predict,” “potential,” or the negative of these terms, and similar expressions intended to identify forward-looking statements. These statements reflect our current views with respect to future events, are based on assumptions which may or may not prove to be correct, and are subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these statements. We discuss many of these risks in greater detail under the heading “Factors Affecting Future Operating Results” in the Original Form 10-Q filing. Also, these statements represent our estimates and assumptions only as of the date of the original Form 10-Q filing.

In this report, unless the context indicates otherwise, the terms “Adept,” “we,” “us,” and “our” refer to Adept Technology, Inc., a California corporation, and its subsidiaries.

This report contains trademarks and trade names of Adept and other companies. Adept has 140 trademarks of which 15 are registered trademarks, some of which include the Adept Technology logo including (among others) AIM^®, FireBlox^®, HexSight^®, Adept Cobra 600™, Adept Cobra 800™, Adept Python^™ Linear Modules, Adept SmartServo^™, AdeptOne^™, AdeptSix^™, AdeptViper^™ and Adept i-Sight^™.

OVERVIEW

We provide intelligent vision-guided robotics and global robotics services to our customers in many industries including the electronics/communications, automotive, industrial appliance, food and pharmaceuticals, semiconductor, original equipment manufacturer, or OEM, and life sciences industries. This mix varies considerably from period to period due to a variety of market and economic factors. We utilize our comprehensive portfolio of high reliability mechanisms, high-performance motion controllers and application development software to deliver automation products that meet our customers’ increasingly complex manufacturing requirements. We offer our customers comprehensive and tailored automation products that reduce the time and cost to design, engineer and launch products into high-volume production. The benefits of Adept automation products include increased manufacturing flexibility for future product generations, less customized engineering and reduced dependence on production engineers. Our product range currently includes system design software, process knowledge software, integrated real-time vision and multi-axis motion controls, machine vision systems and software, industrial robots, and other flexible automation equipment. Our software has not generally been sold or licensed separately, except for vision software, though we intend to market and sell additional software licenses on a standalone basis in the foreseeable future. In recent years, we have expanded our robot product lines and developed advanced software and sensing technologies that have enabled robots to perform a wider range of functions. The Adept 4-axis robots, Adept’s SCARA (Selective Compliance Assembly Robot Arm) robots, are designed for a broad range of basic applications that otherwise utilize dedicated automation or manual labor. This technology is

fundamental to Adept’s business and Adept has recently made developments and launched new SCARA products, which we believe will favorably impact on our gross margins during fiscal 2006, as discussed in “Results of Operations-Gross Margin” below.

In response to the market need for a 6-axis robot that combines speed, flexibility and precision, in April 2005, we expanded our product portfolio to include the AdeptViper robot family, a line of 6-axis articulated robots designed specifically for precision assembly applications. The AdeptViper combines an advanced 6-axis arm design with Adept’s high performance SmartControl software platform allowing 6-axis robotics to be used in small part assembly and material handling manufacturing. Sales of these robots have increased 84% in the first quarter of fiscal 2006 compared to the same period of the prior year.

In September 2005, we introduced a family of new high performance linear modules called Adept Python Linear Modules, primarily for the electronics and automotive markets. These single axis devices can be coupled together by the user to form application-specific custom robot mechanisms ranging from two to four axes. Each Adept Python Module is powered by an Adept MotionBlox 10, an integrated single axis motion controller and power amplifier. Adept Python Linear Modules feature fast delivery times, lower delivered costs, and reduced installation time. This new level of modularity and system level performance reduces the amount of software programming and cabling required in a workcell or a robotic system that performs a specific automation function. Historically, linear modules was significant product line for Adept, which have more recently experienced declining sales volumes. The introduction of the new family of linear modules is expected to increase the percentage of our sales from this line.

International sales recently comprise between 60% and 80% of our total revenues for any given quarter, and represented approximately 67% of our total revenues for the quarter ended October 1, 2005. In recognition of the increasingly international nature of our business, late in the third quarter of fiscal 2005 we announced a new global vertical market business initiative. The new initiative focused resources initially on developing applications for customers in the telecom, data storage, and automotive component vertical markets. We intend to work directly with leading customers in these markets, providing direct sales, service and engineering to develop more targeted products and applications. By being involved directly with the end users during their product planning phase, rather than learning about the end users’ project after planning has been completed, we believe we will be more successful being included in the final design specifications for customers’ production and assembly lines, which we expect will positively impact the size of orders for our products.

We effected a one-for-five reverse stock split on February 25, 2005. All current and historical share and per share information reflect the reverse stock split. The number of shares of common stock issued and outstanding and the number of authorized shares of common stock and preferred stock has been reduced according to the reverse stock split, but the rights and preferences of the shares of our common stock have remained the same. The reverse stock split did not change our financial condition, results from operations or other aspects of our business. However, the reverse stock split has increased our net income or loss per share, as applicable, and net book value per share as a direct result of the reduction in the number of outstanding shares of our common stock.

This discussion summarizes the significant factors affecting our consolidated operating results, financial condition, liquidity and cash flow during the three month period ended October 1, 2005. Unless otherwise indicated, references to any quarter in this Management’s Discussion and Analysis of Financial Condition and Results of Operations refer to our fiscal quarter ended October 1, 2005. This discussion should be read with the unaudited

condensed consolidated financial statements and related disclosures included in this Quarterly Report on Form 10-Q/A and in conjunction with the audited consolidated financial statements and notes thereto for the fiscal year ended June 30, 2005 included in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission on September 28, 2005.

Restatement

This Amended Quarterly Report on Form 10-Q/A includes our restated consolidated financial statements as of October 1, 2005 and for the three months ended October 1, 2005 resulting from the restatement more fully described in Note 18 to the notes to condensed consolidated financial statements.

Critical Accounting Policies

Management’s discussion and analysis of Adept’s financial condition and results of operations are based upon Adept’s condensed consolidated financial statements which have been prepared in conformity with U.S. generally accepted accounting principles. The preparation of these financial statements requires management to make estimates, judgments and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, we evaluate our estimates, including those related to fixed price contracts, product returns, warranty obligations, bad debt, inventories, cancellation costs associated with long-term commitments, investments, intangible assets, income taxes, restructuring expenses, service contracts, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making estimates and judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Estimates, by their nature, are based on judgment and available information. Therefore, actual results could differ from those estimates and could have a material impact on our condensed consolidated financial statements, and it is possible that such changes could occur in the near term.

We have identified the accounting principles which we believe are most critical to our consolidated financial statements while considering accounting policies that involve the most complex or subjective decisions or assessments. These critical accounting policies described below include:

•

revenue recognition;

•

allowance for doubtful accounts;

•

inventories;

•

warranties;

•

deferred tax valuation allowance;

•

foreign currency exchange gain (loss);

•

goodwill; and

•

valuation of stock-based compensation awards.

Revenue Recognition. We generate revenues primarily from sales of production automation equipment and parts, and to a lesser extent from support and service activities associated with this equipment. A small portion of our revenues arises from sales of software. Non-software product revenue consists primarily of sales of robots, refurbished robots and spare parts. We recognize non-software product revenue in accordance with Staff Accounting Bulletin 104, (“SAB 104”), when persuasive evidence of a non-cancelable arrangements exists, delivery has occurred and/or services have been rendered, the price is fixed or determinable, collectibility is reasonably assured, legal title and economic risk is transferred to the customer, and when an economic exchange has taken place. We use the signed purchase contract or purchase order as evidence of an arrangement. Product revenues are normally recognized at the point of shipment from Adept facilities since title and risk of loss passes to the customers at that time. Customers have no right of return other than for product defects covered by our warranty. Adept maintains a warranty liability based on its historical warranty experience and managements’ best estimate of Adept’s warranty liability at each balance sheet date. There are no acceptance criteria on our standard non-software products. We do not deem the fee to be fixed or determinable where a significant portion of the price is due after our normal payment terms, which are 30 to 90 days from the invoice date. In these cases, if all of the other conditions referred to above are met, we recognize the revenue as the invoice becomes due. In recording revenue, management exercises judgment about the collectibility of receivables based on a number of factors, including the customer’s past payment history and its current creditworthiness. If we conclude that collection is not reasonably assured, then the revenue is deferred until the uncertainty is removed, generally upon receipt of payment. Our experience is that we have been able to reliably determine whether collection is reasonably assured.

Adept sells two separate and distinct categories of software: (1) software elements within Adept’s robot and controller products, and (2) standalone software consisting primarily of Hexsight, a library of machine vision software tools. The software elements within Adept’s products are not sold separately nor are they marketed as

separate product offerings to our customers. Our robots and controllers have features that are enabled or enhanced through the use of the software enabling tools and other software elements. Our software enabling tools or other software elements do not operate independently of the robots or controllers, and they are not sold separately and cannot be used without the robots or controllers. Adept believes that the software component of its products is incidental to its products and services taken as a whole. As a result, we recognize software revenue related to product sales in accordance with SAB 104, in consort with SOP 97-2.

We recognize stand-alone software revenue in accordance with the American Institute of Certified Public Accountants’ Statement of Position 97-2 (“SOP 97-2”),Software Revenue Recognition, as amended by SOP 98-9,Modification of SOP 97-2, Software Revenue Recognition With Respect to Certain Transactions. Under SOP 97-2, revenue attributable to an element in a customer arrangement is recognized when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the fee is fixed or determinable, (iv) collectibility is probable and (v) the arrangement does not require services that are essential to the functionality of the software. License revenue is recognized on shipment of the product provided that no significant vendor or post-contract support obligations remain and that collection of the resulting receivable is deemed probable by management. Insignificant vendor and post-contract support obligations are accrued upon shipment of the licensed product. For software that is installed and integrated by the customer, revenue is recognized upon shipment assuming functionality has already been proven in prior sales and there are no customizations that would cause a substantial acceptance risk.

Service and Support revenue consists primarily of sales of spare parts and refurbished robots. Service revenue also includes training, consulting and customer support, the latter of which includes all field service activities; i.e., maintenance, repairs, system modifications or upgrades. Revenues from training and consulting are recognized at the time the service is performed and the customer has accepted the work. These revenues are not essential to the product functionality and, therefore, do not bear on revenue recognition policy for Adept’s component products.

Deferred revenues represent payments received from customers in advance of the delivery of products and/or services, or before the satisfaction of all revenue recognition requirements enumerated above, as well as cases in which we have invoiced the customer but cannot yet recognize the revenue for the same reasons discussed above.

Revenue for robot refurbishment relates to Adept-owned or customer-owned remanufactured robots and components. Adept receives parts returned from customers under warranty contracts, or Adept purchases surplus used parts available from customers or suppliers. These parts traditionally have lower cost, and internal analysis indicates that on average, we pay a percentage of the new part cost to acquire these components. The standard cost for acquired parts is therefore set at such percentage of cost in compliance with GAAP as reflected in the SAB 100 pronouncement requiring valuation of inventory at “lower of cost or market”. By contrast, the cost basis starting point for customer-owned remanufactured or repaired robots is zero since Adept does not own the robots. For all refurbishment and remanufacturing, we track all related costs and activities (material and labor) required to bring the robots up to standard using work orders. This revenue stream is included within the Services and Support segment.

Allowance for Doubtful Accounts. We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We assess the customer’s ability to pay based on a number of factors, including our past transaction history with the customer and credit-worthiness of the customer. Management specifically analyzes accounts receivable and historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in our customer payment terms when evaluating the adequacy of the allowances for doubtful accounts. We do not generally request collateral from our customers. If the financial condition of our customers were to deteriorate in the future, resulting in an impairment of their ability to make payments, additional allowances may be required.

Our policy is to record specific allowances against known doubtful accounts. An additional allowance is also calculated based on the greater of 0.5% of consolidated accounts receivable or 20% of consolidated accounts receivable more than 120 days past due. Specific allowances are netted out of the respective receivable balances for purposes of calculating this additional allowance. On an ongoing basis, we evaluate the credit worthiness of our customers and, should the default rate change or the financial positions of our customers change, we may increase this additional allowance percentage.

Inventories. Inventories are stated at the lower of standard cost, which approximates actual cost under the first-in, first-out method, or market value. We perform a detailed assessment of inventory at each balance sheet date, which includes, among other factors, a review of component demand requirements, product lifecycle and product

development plans, and quality issues. As a result of this assessment, we write down inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of the inventory and the estimated liquidation value based upon assumptions about future demand and market conditions. If actual demand and market conditions are less favorable than those projected by management, additional inventory write-downs may be required.

Manufacturing inventory includes raw materials, work-in-process, and finished goods. All work-in-process inventories with work orders that are open in excess of 180 days are fully written down. The remaining inventory valuation provisions are based on an excess and obsolete systems report, which captures all obsolete parts and products and all other inventory, which have quantities on hand in excess of one year’s projected demand. Individual line item exceptions are identified for either inclusion or exclusion from the inventory valuation provision. The materials control group and cost accounting function monitor the line item exceptions and make periodic adjustments as necessary.

Warranties. Our warranty policy is included in our Terms of Sale and states that there are no rights of return, and that a refund may be made at Adept’s discretion, and only if there is an identified fault in the product and the customer has complied with Adept’s approved maintenance schedules and procedures, and the product has not been subject to abuse. We provide for the estimated cost of product warranties at the time revenue is recognized. Factors that affect the Company’s warranty liability include the number of installed units, historical and anticipated rates of warranty claims, and costs per claim for repair or replacement. While we engage in extensive product quality programs and processes, including actively monitoring and evaluating the quality of our components suppliers, our warranty obligation is affected by product failure rates, material usage and service labor and delivery costs incurred in correcting a product failure. Should actual product failure rates, material usage, service labor or delivery costs differ from our estimates, revisions to the estimated warranty liability would be required.

Deferred Tax Valuation Allowance. We record a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized. While we have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event we were to determine that we would be able to realize deferred tax assets in the future in excess of our net recorded amount, an adjustment to the deferred tax asset would increase income in the period such determination was made. Likewise, should we have a net deferred tax asset and determine that we would not be able to realize all or part of our net deferred tax asset in the future, an adjustment to the deferred tax assets would be charged to income in the period that such determination was made.

Foreign Currency Exchange Gain (Loss). The Company applies Financial Accounting Standards Board Statement No. 52 (“SFAS 52”), “Foreign Currency Translation,” with respect to its international operations, which are primarily sales and service entities. The accounts denominated in non-U.S. currencies have been re-measured using the U.S. dollar as the functional currency. All monetary assets and liabilities are remeasured at the current exchange rate at the end of the period, nonmonetary assets and liabilities are remeasured at historical exchange rates, and revenues and expenses are remeasured at average exchange rates in effect during the period. The Company performs a detailed review of the underlying monetary and nonmonetary transactions each quarter to ensure these transactions are correctly evaluated based on FAS 52 pronouncement guidelines. Adept does not currently apply a hedging strategy against its currency positions as defined under FAS 133,Accounting for Derivative Instruments and Hedging Activities.

Goodwill. The carrying value of goodwill and other intangible assets are reviewed for possible impairment in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets.” The Company’s impairment review is based on a discounted cash flow approach that requires significant management judgment with respect to future sales and production volumes, revenue and expense growth rates, changes in working capital use, foreign exchange rates and selection of an appropriate discount rate. Impairment occurs when the carrying value of a reporting unit exceeds the fair value of that reporting unit. An impairment charge is recorded for the difference between the carrying value and the net present value of estimated future cash flows, which represents the estimated fair value of the reporting unit. The Company tests its intangible assets annually on April 1 unless there are indications during an interim period that such assets may have become impaired. The Company uses its judgment in assessing whether intangible assets may have become impaired between annual valuations. Indicators such as unexpected adverse economic factors, unanticipated technological change or competitive activities may signal that an intangible asset has become impaired.

Valuation of Stock-Based Compensation Awards. We account for stock-based compensation in accordance with the fair value recognition provisions of SFAS No. 123R. Under SFAS No. 123R, stock-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the vesting period of the individual equity instrument. Determining the fair value of stock-based awards at the grant date requires judgment, including estimating the expected term of stock options, the expected volatility of our stock, and expected dividends. The computation of the expected volatility assumption used in the Black-Scholes calculation for option grants is based on historical volatility as options on our stock are not traded. When establishing the expected life assumption, we review annual historical employee exercise behavior of option grants with similar vesting periods. In addition, judgment is also required in estimating the amount of stock-based awards that are expected to be forfeited. If actual forfeitures differ significantly from these estimates, stock-based compensation expense and our results of operations could be materially affected.

Results of Operations

Revenues. Revenues increased by 29.6% to $14.6 million for the three months ended October 1, 2005 as compared to $11.3 million for the three months ended October 2, 2004. The increase resulted from strong sales in both the Robotics and Service business segments. Robotics segment revenues increased due to continuing strong sales of 4-axis Cobra robots and improving sales of the new 6-axis Viper robots, partially offset by reduced revenues from vision software. The Service segment benefited from very substantial growth in revenues compared to prior periods from the sale of remanufactured robots. Some of this increase reflects a surge in demand which management does not expect to continue from quarter to quarter.

In terms of our business segments, Robotics revenues increased 8.2% to $8.2 million for the three months ended October 1, 2005 from $7.6 million for the three months ended October 2, 2004. Services and Support revenues were $6.4 million for the three months ended October 1, 2005, compared to $3.7 million for the three months ended October 2, 2004, representing a 73% increase.

Our domestic sales were $4.9 million for the three months ended October 1, 2005 compared to $3.2 million for the three months ended October 2, 2004, an increase of 51.6%. The majority of the increase in domestic sales occurred in Services and Support and resulted from increased sales of manufactured robots. Our international sales were $9.8 million for the three months ended October 1, 2005 compared to $8.1 million for the comparable period in fiscal 2004, an increase of 20.9%. The increase in revenues from international sales is primarily attributable to strong sales associated with automotive component and consumer electronics applications in Europe. We have strengthened our international presence with the introduction in fiscal 2005 of European-sourced manufacturing and are in the process of staffing a service office in China.

We expect that revenues from our international customers will continue to account for a significant portion of our total revenue and approximately 40% to 50% of our product sales to European customers are priced in euros. The mix of euro-denominated business has historically enhanced the competitiveness of our prices, and has increased our revenues and gross margins when the euro has strengthened relative to the US dollar, however, the euro has weakened of late, and future fluctuations in the rate of exchange between the dollar and the euro have the potential to significantly impact, either positively or adversely, our business and operating results.

Gross Margin. Gross margin as a percentage of revenues was 46.8% for the three months ended October 1, 2005 compared to 48.4% for three months ended October 2, 2004. The comparative gross margin decline principally resulted from Adept not licensing significantly less Hexsight^™ vision software, a higher margin product, in the quarter ended October 1, 2005 than in the first quarter of fiscal 2005. This slight erosion of gross margin was partially offset by improved robot design resulting in lower cost. Over the past several quarters, we have aggressively sought to outsource those processes where we provide little or no additional manufacturing value. We anticipate that improvements in production volumes combined with the lower fixed overhead expense will result in lower unit standard costs and higher corresponding gross margins. We could, however, experience significant fluctuations in our gross margin percentage due to changes in volume, changes in availability of components, changes in product configuration, increased price based competition, and/or changes in sales mix, particularly with respect to any software license sales.

Research, Development and Engineering Expenses. Research, development and engineering expenses associated with continuing operations increased by 14.5% to $1.9 million, or 13.0% of revenues for the three months ended October 1, 2005, from $1.7 million, or 14.7% of revenues for three months ended October 2, 2004. The growth in R&D outlays was the result primarily of increased expenditures for software development activities.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $5.2 million, or 35.3% of revenues, for the three months ended October 1, 2005, an increase of $1.4 million from $3.8 million or 33.6% of revenues for the three months ended October 2, 2004. The increases are primarily due to several sales and marketing projects for new product launches and sales development activities, higher expenses for accounting and legal fees for services relating to corporate governance matters as well as the Company’s public reporting requirements, and the inclusion of stock option compensation expenses beginning this quarter, partially offset by a reduction in charges for bad debt.

Interest Expense, Net. Interest expense, net of interest income, was $28,000 for the three months ended October 1, 2005 compared to $37,000 for the three months ended October 1, 2004. Interest expense for the three month periods ended October 1, 2005 and October 2, 2004 included interest expense accrued on a $3.0 million convertible note due June 2006, which bears a 6% fixed interest rate.

Foreign Currency Exchange Gain (Loss). Foreign currency exchange (loss) was $(59,000) for the three months ended October 1, 2005 compared to a gain of $83,000 for the three months ended October 2, 2004. Foreign currency exchange gains and losses resulted primarily from our sales and operating activities in Europe and movements in the euro versus the U.S. dollar.

Provision for Income Taxes. Adept typically provides for income taxes during interim reporting periods based upon an estimate of our annual effective tax rate. We also maintain a liability to cover the cost of additional tax exposure items on the filing of federal and state income tax returns as well as filings in foreign jurisdictions. Each of these filing jurisdictions may audit the tax returns filed and propose adjustments. Adjustments arise from a variety of factors, including different interpretations of statutes and regulations. While we have net operating losses which are sufficient to offset most of our domestic and foreign tax obligations, we recorded a modest provision for taxes that may not be so covered in the first quarters of fiscal 2006 and 2005.

Liquidity and Capital Resources

Cash and Cash Equivalents. Cash and cash equivalents decreased $1.8 million from June 30, 2005 to $3.5 million. Net cash used in operating activities of $1.5 million was mainly attributable to an increase in accounts receivable of $3.3 million, partially offset by decreases in prepaid expenses and increases in accounts payable and other accrued liabilities, primarily accrued payroll and related liabilities. The increase in accounts receivable primarily resulted from the relative increase in product shipments and of cash collections during the quarter. Other items affecting the operating cash flows were net loss of $356,000 augmented by non-cash charges including depreciation and amortization of $180,000, non-cash interest expense of $45,000, and non-cash compensation charges of $189,000 relating to expensing of stock options.

Cash used in investing activities of $451,000 reflects capital expenditures primarily for test equipment, test stations, and computer hardware and software.

Cash provided by financing activities of $146,000 reflects activity in our employee stock purchase program as well as stock option exercises.

We have limited cash resources, and because of certain regulatory restrictions impeding our ability to move certain cash reserves from our foreign operations to our U.S. operations, we may have limited access to a portion of our existing cash balances held outside the United States, although this portion is estimated to be less than $500,000. As of October 1, 2005, we had an aggregate cash balance of $3.5 million, and a short term receivables financing credit facility of up to $5.0 million, with no outstanding balance at quarter-end. We currently depend on funds generated from operating activities plus our cash, and the funds available through our credit facility to meet our operating requirements. As a result, if any of our assumptions, some of which are described below, are incorrect, we may have difficulty satisfying our obligations in a timely manner. Our ability to effectively operate and grow our business is predicated upon certain assumptions, including (i) that we will receive continued timely payment of outstanding receivables and not otherwise experience severe cyclical swings in our billings and associated receipts resulting in a shortfall of cash available for our disbursements during any given quarter, (ii) that we will not incur significant unplanned capital expenditures for the balance of fiscal 2006, and (iii) that funds remain available under our credit facility. We believe our sources of funds will be sufficient to finance our operations for at least the next twelve months, and if necessary we will take various actions to reduce our operating expenses in an effort to achieve that result.

On June 15, 2005, Adept entered into an Amendment to Loan Documents (the “Amendment”) with Silicon Valley Bank (“SVB”), which effectively extended and increased Adept’s line of credit with SVB. The Amendment provides that Adept may borrow amounts under the credit facility not to exceed the lesser of (i) $5.0 million (an increase of $1.0 million from the predecessor agreement) or (ii) the sum of 80% of Adept’s eligible accounts receivable plus any over-advance loans that may be granted by SVB from time to time in its sole and absolute discretion, plus foreign accounts, less the amount of all outstanding letters of credit and less the amount equal to 10% of outstanding FX Contracts. The aggregate of over-advance loans may not exceed the lesser of $1.0 million or 30% of Adept’s eligible accounts receivable. Foreign accounts represent an additional borrowing base under the Amendment, must meet the same eligibility requirements as domestic receivables except they may be located outside the U.S. and Canada, and are permitted up to a maximum of 25% of the total eligible accounts receivable, the latter being defined as the “Borrowing Base”.

As amended, the Loan and Security Agreement includes certain financial and other covenants with which Adept must comply. Financial covenants specify that Adept must maintain a tangible net worth of at least $10.8 million, plus 50% of all consideration received by Adept for any equity securities and subordinated debt of Adept issued subsequent to the date of the Loan and Security Agreement, plus 50% of Adept’s net income in each fiscal quarter ending after the date of the agreement. Once an increase in the minimum tangible net worth of Adept takes effect, it remains in effect thereafter, and does not decrease. Other covenants with which Adept must comply, include, but are not limited to, maintenance of accurate records and GAAP reporting, the payment of Adept’s tax obligations as and when due and the maintenance of Adept’s primary operating deposit accounts with SVB. Adept cannot make any transfers to any of its subsidiaries of money or other assets with an aggregate value in excess of $300,000 in any fiscal quarter and is subject to customary default provisions. In the event of default under the Loan and Security Agreement, SVB may, among other things, cease making loans to Adept; accelerate and declare all or any part of Adept’s obligations to be immediately due and payable, and enforce its security against the collateral.

Contractual Obligations

Total long term debt and operating lease obligations at October 1, 2005 were $11.2 million, which consists of $8.2 million in operating lease obligations and $3.0 million in short-term debt in the form of a convertible subordinated note due June 30, 2006. A summary of our contractual obligations, including long-term debt and operating lease obligations as of October 1, 2005 follows:


	Total		Less Than 1 Year		Years 2 and 3		Years 4 and 5		More than 5 Years
Operating lease obligations	$	8,215	$	1,301	$	3,005	$	2,502	$	1,407
Short-term debt		3,000		3,000		—		—		—

Total short-term debt and Operating lease obligations	$	11,215	$	4,301	$	3,005	$	2,502	$	1,407

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio. We maintain an investment policy, which seeks to ensure the safety and preservation of our invested funds by limiting default risk, market risk and reinvestment risk. The table below presents principal cash amounts and related weighted-average interest rates for our investment portfolio, all of which matures in less than 12 months.


(in thousands)	October 1 2005			October 1 2005			Fair Value			Fair Value
	(as previously reported)			(as restated)			(as previously reported)			(as restated)
Cash and cash equivalents	$	3,754		$	3,529		$	3,754		$	3,529
Average rate		1.4	%		1.4	%		1.4	%		1.4	%

We mitigate default risk by investing in high credit quality securities and by positioning our portfolio to respond appropriately to a significant reduction in a credit rating of any investment issuer or guarantor. Our portfolio includes only marketable securities with active secondary or resale markets to ensure portfolio liquidity and contains what management believes to be a prudent amount of diversification.

We conduct business on a global basis. Consequently, we are exposed to adverse or beneficial movements in foreign currency exchange rates. We have historically employed, but do not currently employ, a currency hedging strategy.

ITEM 4.

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures.

As disclosed in our Original Form 10-Q filing, as of the end of the quarter ended October 1, 2005, Adept carried out an evaluation, under the supervision and with the participation of members of our management, including our Chief Executive Officer (CEO) and former Chief Financial Officer (CFO), of the effectiveness of the design and operation of Adept’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on this evaluation, Adept’s Chief Executive Officer and former Chief Financial Officer concluded that Adept’s disclosure controls and procedures were not effective in light of material weaknesses in Adept’s internal controls related to errors in the calculation of inventory reserves and stock option compensation under FAS 123R, as noted by Armanino McKenna LLP, Adept’s independent auditors.

Adept also disclosed the material weakness previously identified by Adept’s former independent auditors during their performance of year-end audit procedures related to our financial statements for the year ended June 30, 2005. The material weakness related to the high number of post-closing adjustments recorded by Adept. This weakness in the communication, analysis and review elements of our financial accounting function did not allow us to provide reasonable assurance that financial information was processed and reported accurately and timely.

Adept indicated in the Original Form 10-Q Filing that it would in the future take certain remedial efforts, such as more detailed procedures, redesigning certain reporting methodologies to eliminate sources of error and increase automation of reports, reviewing international subsidiary consolidation process to eliminate sources of error in the consolidations, and implement additional training for appropriate finance personnel to ensure all aspects of our financial statement close processes reflect full compliance with U.S. generally accepted accounting principles.

Subsequent to the issuance of the Adept’s consolidated financial statements for the period ended October 1, 2005, in connection with the annual consolidation, audit and preparation of Adept’s Annual Report on Form 10-K for the fiscal year ended June 30, 2006, Adept and its auditors identified errors in a number of accounts, primarily involving intercompany eliminations associated with its consolidation of international subsidiaries. Management initiated a comprehensive review of the company’s financial books and records, including those of all subsidiary companies, relating to the interim financial statements for each of the quarterly periods of fiscal 2006 and, where applicable, prior periods, to determine the nature and amount of the errors and the applicable periods to which they relate. Due

to the volume of the consolidation adjustments and complexities involved in the consolidation process especially the consolidation of Adept’s international foreign currency-based subsidiaries, the company determined that it was necessary to essentially re-perform the consolidation of the financial statements for the interim periods of fiscal 2006. In October 2006, Adept concluded that the errors in its financial statements constituted material inaccuracies in the interim financial statements for the quarters ended October 1, 2005, December 31, 2005 and April 1, 2006 which would require restatement. For the quarter ended October 1, 2005, we have restated our condensed consolidated balance sheet as of October 1, 2005, our condensed consolidated statement of operations for the three months ended October 1, 2005, and our condensed consolidated statement of cash flows for the three months ended October 1, 2005. Note 18 to the Notes to Restated Condensed Consolidated Financial Statements discusses the specific adjustments made for the quarter ended October 1, 2005.

Specifically, adjustments were made to address the following items relating to the interim results for the quarter ended October 1, 2005:

•

Improper elimination of the profit in inventory held by international subsidiaries which has been transferred from the U.S. resulting in overstatement of reported inventories and gross margins.

•

Improper identification and elimination of intercompany transactions and receivable/payable account balances between Adept subsidiaries.

•

Improper recording of foreign exchange transaction gains and losses.

•

Mistreatment or inconsistent re-measurement of balances denominated in foreign currencies or US dollar cash balance in foreign subsidiaries.

•

Erroneous consolidating entries for foreign subsidiaries created certain incorrect asset and liability balances within the consolidated financial statements.

In its subsequent re-evaluation of internal controls in the course of its review of previously issued interim financial statements, Adept’s CEO and CFO determined that the company did not have effective disclosure controls and procedures. Further, Adept’s independent auditors, in performing their audit of the company’s fiscal 2006 financial results identified certain control deficiencies that constitute material weaknesses. The following material weaknesses in the company’s controls resulting in the errors identified above have been identified by Adept’s management or its external auditors, in the course of their first audit of Adept:

Adept did not maintain effective controls over the accounting processes for its foreign subsidiaries as existing accounting information systems and related consolidation and review processes were inadequate to ensure adequate reporting of financial results.

Adept did not maintain a sufficient complement of personnel with an appropriate level of accounting knowledge, experience and training in the application of generally accepted accounting principles commensurate with the company’s operations and financial reporting requirements. Specifically, certain finance positions were staffed with individuals with insufficient strength in U.S. generally accepted accounting principles or there were incompatible duties being performed by staff, in particular as to accounts and transactions relating to Adept’s foreign subsidiaries.

Adept failed to maintain effective controls over the completeness and accuracy of period-end financial reporting and close processes related to financial statement consolidations, intercompany eliminations and reconciliations of sub-ledger to general ledger balances.

Management did not have effective review and monitoring over the period-end financial reporting and close processes related to consolidations, intercompany eliminations and reconciliations of sub-ledger to general ledger balances, and the documentation supporting activities was inadequate.

Adept lacked standard procedures for the authorization and review of consolidation and post-closing journal entries.

Adept did not have an adequate process for the preparation (and review) of its consolidated financial statements to ensure all accounts were properly reconciled closing/consolidating entries were recorded in a timely manner, and balance sheet reclassifications of capital lease obligations were properly made.

Adept failed to properly track and document the results of its inventory cycle counting process.

Changes in Internal Control Over Financial Reporting.

Since the end of fiscal 2006, Adept has identified and is beginning to implement certain changes and procedures in an effort to further improve the effectiveness of its internal control over financial reporting, in part to remedy control deficiencies reported for prior periods and the restatement items discussed above, and is continuing to evaluate additional improvements which may be necessary. In general, these measures include enhancing documentation of policies and procedures, segregation of duties, controls surrounding the processing of critical spreadsheet applications and general information technology controls. More specifically, measures to strengthen internal control over financial reporting which the company has identified for implementation include:

•

Reorganizing the accounting function and active recruitment of additional personnel for the finance organization, in particular, individuals with expertise in international consolidations, U.S. GAAP accounting, and internal control over financial reporting matters;

•

Establishing a process for effective review and monitoring of inputs into the consolidation;

•

A review of the software tools utilized within the accounting, consolidation and reporting processes with the goal of standardizing tools and processes for each of the company’s subsidiaries;

•

Establishing a review process which includes mandatory sign-off, by both financial and non-financial personnel, of the financial statements for each subsidiary prior to consolidation;

•

Enhancing review and sign off procedures for month end journal entries as well as analyses used in the preparation of financial statements; and

•

Establishing an independent review of adjusting closing consolidation and inter-company elimination entries exceeding specified amounts, by the CFO and Corporate Controller.

The Company will continue to review its internal controls and may identify other measures for implementation in connection with the weaknesses identified above or otherwise. The process of designing and implementing effective controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to develop and maintain a system of internal control over financial reporting that is adequate to satisfy our reporting obligations as a public company. In our undertaking of this continuous effort, we may identify various control deficiencies. We will assess the significance of identified control deficiencies that come to our attention and determine the extent to which such deficiencies may be mitigated or require remediation.

PART II – OTHER INFORMATION

ITEM 6.

EXHIBITS

The following exhibits are filed as part of this report.


31.1		Certification by the Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification by the Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification by the Chief Executive Officer and the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.


ADEPT TECHNOLOGY, INC.

By:		/s/ Steven L. Moore
		Steven L. Moore Vice President, Finance and Chief Financial Officer

By:		/s/ Robert H. Bucher
		Robert H. Bucher President and Chief Executive Officer

Date: October 17, 2006

INDEX TO EXHIBITS


31.1	*	Certification by the Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	1

31.2	*	Certification by the Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	2

32.1	*	Certification by the Chief Executive Officer and the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	3

*	Filed with this Quarterly Report on Form 10-Q/A

Adept Technology (ADEP) Inactive 10-Q/A2006 Q1 Quarterly report (amended)